Star river Electronics case
Problem Statement
Star River Electronics, a Singapore based company, is a large manufacturer and supplier of CD-ROMS. It was founded as a joint venture between New Era Partners and Star Light Electronics Ltd. In the past decade, Star River has been very successful due its excellent reputation for producing high quality discs. In 1999, CD ROM disc drives comprised ninety three percent off all optical disc shipments. This created a high demand and allowed for manufacturing companies of all sizes to enter the market. Due to the oversupply of product, CD-ROM prices were pushed down by as much as 40%. Corporate consolidations followed suit but Star Rivers managed to survive the industry shakeout.
In 2001, Adeline Koh is appointed to fill the position of CEO after the former CEO’s unexpected resignation. In order to ensure the continuation and financial stability of Star River, she immediately takes initiative and meets with her assistant, Andy Chin, to discuss the company’s most significant issues.
Digital Video Discs or DVDs are expected to cut into the CD ROM market very soon. It is predicted that by 2005, DVDs would comprise 59% of the total optical disc-drive shipments while CD-ROMs would account for the remaining 41%. Star River’s digital video discs currently make up only five percent of their sales. It is significant that Star River build upon their growth and capabilities in this segment. One way to do so is to increase capital expenditures and invest in DVD manufacturing equipment. In addition, Adeline Koh received a proposal for new packaging equipment that has the potential to cut down on labor and overhead costs significantly. A decision must be made whether to purchase the equipment immediately or wait three years when it will be imperative to purchase in order to handle the projected growth rates.
Star River Electronics, a Singapore based company, is a large manufacturer and supplier of CD-ROMS. It was founded as a joint venture between New Era Partners and Star Light Electronics Ltd. In the past decade, Star River has been very successful due its excellent reputation for producing high quality discs. In 1999, CD ROM disc drives comprised ninety three percent off all optical disc shipments. This created a high demand and allowed for manufacturing companies of all sizes to enter the market. Due to the oversupply of product, CD-ROM prices were pushed down by as much as 40%. Corporate consolidations followed suit but Star Rivers managed to survive the industry shakeout.
In 2001, Adeline Koh is appointed to fill the position of CEO after the former CEO’s unexpected resignation. In order to ensure the continuation and financial stability of Star River, she immediately takes initiative and meets with her assistant, Andy Chin, to discuss the company’s most significant issues.
Digital Video Discs or DVDs are expected to cut into the CD ROM market very soon. It is predicted that by 2005, DVDs would comprise 59% of the total optical disc-drive shipments while CD-ROMs would account for the remaining 41%. Star River’s digital video discs currently make up only five percent of their sales. It is significant that Star River build upon their growth and capabilities in this segment. One way to do so is to increase capital expenditures and invest in DVD manufacturing equipment. In addition, Adeline Koh received a proposal for new packaging equipment that has the potential to cut down on labor and overhead costs significantly. A decision must be made whether to purchase the equipment immediately or wait three years when it will be imperative to purchase in order to handle the projected growth rates.